Author Archive

  • AFLAC Earned $1.28 per Share for Q4
    , February 2nd, 2022 at 4:21 pm

    After the bell, AFLAC (AFL) reported Q4 earnings of $1.28 per share. That’s an increase of 19.6%. The weaker exchange rate pinged earnings by five cents per share.

    Q4 revenues were $5.4 billion. That’s down from $5.9 billion in the fourth quarter of 2020.

    During Q4, Aflac spent $625 million to repurchase 11.1 million of its common shares. For the full year, Aflac deployed $2.3 billion in capital to repurchase 43.3 million of its common shares. At the end of December 2021, the company had 55.8 million remaining shares authorized for repurchase.

    Shareholders’ equity was $33.3 billion, or $50.99 per share, at December 31, 2021, compared with $33.6 billion, or $48.46 per share, at December 31, 2020. The annualized return on average shareholders’ equity in the fourth quarter was 12.4% and 12.9% for the full year.

    For the full year of 2021, total revenues were down 0.2% to $22.1 billion, compared with $22.1 billion for the full year of 2020. Adjusted earnings for the full year of 2021 were $4.0 billion, or $5.94 per diluted share, compared with $3.6 billion, or $4.96 per diluted share, in 2020. Excluding the negative impact of $0.06 per share from the weaker yen/dollar exchange rate, adjusted earnings per diluted share increased 21.0% to $6.00 for the full year of 2021.

    DIVIDEND

    The board of directors declared the first quarter dividend of $0.40 per share, payable on March 1, 2022 to shareholders of record at the close of business on February 16, 2022.

    OUTLOOK

    Commenting on the company’s results, Chairman and Chief Executive Officer Daniel P. Amos stated: “The company generated strong earnings for the year, largely supported by the continuation of low benefit ratios associated with pandemic conditions and better-than-expected returns from alternative investments. While we saw improvements in the quarter for both the United States and Japan, we continue to remain cautiously optimistic in the face of ongoing pandemic conditions.

    “Looking at our operations in Japan, I am encouraged by the 7.7% sales increase for the year, which included the first quarter introduction of our medical product EVER Prime and the September launch of our new nursing care product. However, we continued to navigate evolving pandemic conditions in Japan, including various states of emergency that may impact our ability to meet face-to-face with customers, which continues to be key to a recovery in sales.

    “In the U.S., I am pleased with the 16.9% sales increase for the year. At the same time, I am encouraged by reports of new small business formation and the resiliency of larger businesses. Our sales in the fourth quarter reflect increased face-to-face sales opportunities. We continue to work toward reinforcing our position and generating stronger sales in 2022, realizing we may face headwinds from pandemic conditions.

    “As always, we are committed to prudent liquidity and capital management. This includes maintaining strong capital ratios on behalf of our policyholders in both the U.S. and Japan. It goes without saying that we treasure our record of dividend growth. Coming off our 39th consecutive year of dividend increases, I am pleased with the board’s decision to increase the quarterly dividend by 21.2% in the first quarter, as we announced in November. Our dividend track record is supported by the strength of our capital and cash flows. At the same time, we remain in the market repurchasing shares with a tactical approach and focused on integrating the growth investments we have made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership.”

  • Thermo Fisher Beats Earnings
    , February 2nd, 2022 at 9:00 am

    This morning, Thermo Fisher Scientific (TMO) reported Q4 earnings of $6.54 per share which was much more than Wall Street’s forecast of $5.27 per share. I said I was expecting a big earnings beat and I was right.

    For the entire year, Thermo made $25.13 per share. That was an increase of 28% over 2020. Thermo’s revenue grew 22% to $39.21 billion. The company’s most recent guidance had been for $23.37 per share.

    TMO’s quarterly revenue rose by 1% to $10.70 billion. The company had Covid revenue of $2.45 billion.

    For 2022, Thermo sees revenue of $42 billion. Wall Street had been expecting $40.7 billion. The company sees 2022 earnings of $22.43 per share. Wall Street had been expecting $21.87 per share.

    One other news item. The big jobs report is due out on Friday, but this morning we got a possible preview. ADP said that private payrolls fell by 301,000 last month. This was the first jobs loss since December 2020.

    According to ADP, Omicron wreaked havoc on the jobs market. The leisure and hospitality sector lost 154,000 jobs. The jobs gain number for December was revised downward to 776,000.

    Trade, transportation and utilities cut 62,000 while the other services category declined by 23,000.

    Manufacturing also lost 21,000 positions, while education and health services reported a drawdown of 15,000 and construction fell by 10,000.
    Service-providing industries were responsible for 274,000 of the job losses, with goods producers falling by 27,000.

    “The labor market recovery took a step back at the start of 2022 due to the effect of the omicron variant and its significant, though likely temporary, impact to job growth,” ADP chief economist Nela Richardson said.

    For Friday’s official government report, Wall Street expects to see a gain of 150,000 net new jobs.

  • Morning News: February 2, 2022
    , February 2nd, 2022 at 7:09 am

    Euro-Zone Inflation Unexpectedly Hits Record, Pressuring ECB

    Japanese Banks Sound Caution for Earnings As Omicron Highlights Bad Loan Risks

    Why Are Oil Prices So High and Will They Stay That Way?

    A Normal Supply Chain? It’s ‘Unlikely’ in 2022.

    Warehouse Space Is the Latest Thing Being Hoarded

    Consumers Are Pivoting Spending to Services Like Dining and Travel

    Wall Street Bankers Heading for Biggest Bonus Payday in Decade

    U.S. Job Openings, Quits Remained Elevated at End of Last Year

    First Black Woman Picked for Fed Draws GOP Fire Over Research

    Zuckerberg’s Plan to Overcome Washington’s Aversion to Metaverse

    Alphabet Stock Split Aimed at Bringing Google Shares to Masses

    Google Vanquished a Rival in Prague. Payback Could Hurt.

    GM Earnings Rose Sharply in 2021

    Where Olympic Sponsor Coca-Cola Stands With China

    Cathie Wood’s True Believers Are Sticking With Her

    A Year On, GameStop Champion Roaring Kitty Is Quiet — Yet Much Richer

    Why Is Matt Damon Shilling for Crypto?

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  • CWS Market Review – February 1, 2022
    , February 1st, 2022 at 6:12 pm

    (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

    The Stock Market Stumbled Into January

    The stock market certainly didn’t get off to a good start this year. For the month of January, the S&P 500 lost 5.26%. That was the market’s worst month since March 2020 and it was the worst January since 2009.

    Actually, it could have been worse. The S&P 500 posted big gains on the final two trading days of the month. In fact, we came very close to being in an official correction. From the market’s closing high on January 3 to the closing low from last Thursday, the S&P 500 lost 9.80%. The Nasdaq Composite did even worse and it’s still in correction territory.

    We’ve got a decent bump on Friday and Monday plus a nice gain today, but it’s too early to say the selling wave is over. How do we know when the coast is clear? That’s hard to say, but one encouraging sign is that the S&P 500 has poked its head back above its 200-day moving average (the green line in the chart below). We still have about 1.8% to go until the index breaks above its 50-day moving average.

    Don’t be surprised to see another downswing. The market likes to test and retest its recent low. Wall Street bears are easily startled, but they’ll soon be back, and in greater numbers.

    Wall Street has finally acclimated itself to the idea that the Fed is really truly going to raise interest rates. The futures market has literally priced the odds of a March hike at 100%. That sounds pretty certain. There’s even been some recent talk of the Fed hiking rates by 0.50%. Call me a doubter.

    The big question for the Fed is how inflation will behave. Consider some facts: Crude oil is up 65% in the last year, and it recently touched a seven-year high. Cotton is at a 10-year high. Orange juice futures got to their highest level since 2018.

    This morning, the Institute for Supply Management said that its ISM Manufacturing index fell to 57.6 last month. That’s the lowest number in 15 months. This signals that the factory sector of the economy may be slowing. Goldman Sachs cut its Q1 GDP growth forecast to 0.5% from 2%.

    Church & Dwight Rallies on Strong Earnings

    One of the ideas I try to stress to investors is understanding what kind of stocks they own. Specifically, investors should know if a stock they own is a defensive stock or a cyclical stock.

    It’s not that one kind of stock is better than the other. It’s that both groups move in big waves. That means that no matter how good or bad a given stock is, it can easily get wrapped up in the broader trend.

    By defensive stock, I mean a company whose business fortunes aren’t closely tied to the status of the economy. A perfect example from our Buy List is Church & Dwight (CHD). The company owns a broad range of consumer brands. They have everything from Arm and Hammer to Trojan, OxiClean and Nair.

    If the economy hits the skids, Church & Dwight’s business won’t be terribly impacted. It makes the kind of things people need all the time. Contrast that with a company like a chemical company or a homebuilder. Those sectors tend to be “feast or famine.” In fact, much of the business for these kinds of companies involves managing themselves between the busts.

    Over the summer, CHD warned us that Q3 was going to be weak. It saw earnings coming in at 70 cents per share. The official word was that they were “temporarily constrained by supply.”

    Apparently, they weren’t as constrained as advertised. CHD had a great Q3, earning 80 cents per share.

    Over the last few months, shares of Church & Dwight have performed quite well. Much of that is due to the market’s recent concerns that the economy may be slowing down. Lots of defensive stocks have done well. Another good example from our Buy List is Hershey (HSY).

    A few months ago, Church & Dwight told us to expect Q4 earnings of 61 cents per share. On Friday we got the report and again, CHD underestimated themselves. The company made 64 cents per share for its Q4. That’s up 20.8% from a year ago. Wall Street had been expecting earnings of 60 cents per share.

    For the year, the company made $3.02 per share. That’s up 6.7% from a year ago. Full year net sales grew 6% to $5.19 billion.

    CEO Matthew Farrell said:

    Our brands once again experienced strong consumption in Q4 2021. In the U.S. we grew consumption in 11 of the 16 categories in which we compete. Five of our brands experienced double digit consumption growth including ARM & HAMMER® Scent Boosters, ARM & HAMMER® Clumping Litter, OXICLEAN® stain fighters, BATISTE® dry shampoo and ZICAM® zinc supplements. Consumption continues to outpace shipments as supply chain disruptions continue. This strong consumption would likely have been higher if not for the ongoing supply chain challenges. This demonstrates the strength of our brands as we gained share on 6 of the 13 power brands in a difficult supply environment. Global online sales grew 12.7% in 2021, and as a percentage of total sales has expanded to 15% for the full year.

    Church & Dwight said rising material costs have pinged their gross margins. The company also said it’s facing higher transportation costs and labor shortages. While they expect supply issues to gradually abate, the company is raising prices. By the end of this month, Church & Dwight expects to have taken pricing action on 80% of their portfolio brands. Fortunately, most CHD brands have a strong position in their respective markets so they can command higher prices. Companywide gross margins were 42.5% in Q4.

    The company also raised its quarterly dividend from 24.25 cents per share to 26.25 cents per share. That comes to $1.05 for the year. That’s a yield of a little over 1%. This is CHD’s 26th consecutive annual dividend increase.

    The market apparently liked the report as shares of CHD rallied 4.40% to close at $103. I continue to rate CHD a strong buy up to $110 per share.

    Rollins Is Worth a Look

    One of the best ways to find good investment opportunities is to follow excellent companies and wait for their share prices to fall apart.

    A good example is Rollins (ROL). The company is in the pest control business. In plainer terms, they kill bugs for money. Rollins is the parent company of Orkin.

    I realize it sounds icky, and it is, but that doesn’t mean it’s a bad investment. Quite the opposite. In his book One Up on Wall Street, Peter Lynch wrote, “Better than boring alone is a stock that’s boring and disgusting at the same time. Something that makes people shrug, retch, or turn away in disgust is ideal.” Yep, that’s Rollins.

    Check out the growth in its EPS:

    The red part of the line is the estimate.

    It’s amazing how few people know about this stock. Only five analysts on Wall Street bother following Rollins even though it has a market value of $15 billion. Years ago, Rollins was a diversified company with lots of holdings. They eventually spun off their oil and gas units into another company. What was left was the pest control business which is a very nice business to own.

    The company is able to maintain gross margins in excess of 50%. As it turns out, killing bugs is very profitable. Since 2000, shares of Rollins are up more than 55-fold.

    Check out this chart of ROL’s performance since May 2000. For context, see that blue line down there? That’s Berkshire Hathaway:

    Rollins now has two million customers at 700 locations around the world. The company currently pays a quarterly dividend of 10 cents per share, but it’s been known to hand out special dividends at the end of the year. I like companies that do that.

    Despite the company’s long-term success, the stock hasn’t done that well lately. Shares of ROL peaked at $43 in October 2020. Last week, the stock got as low as $28.51 per share.

    The earnings report came out last Wednesday and Rollins said it had Q4 earnings of 14 cents per share. That was one penny below estimates. This was the second quarter in a row that Rollins has missed estimates.

    Rollins has faced some serious issues over the past year. The SEC said it was investigating the company’s accounting. Rollins doesn’t appear to be consistent in how they’ve reported revenue. The company is working with the SEC to resolve these issues. The takeaway for us is that the stock is down a lot. I wouldn’t say the shares are cheap, but they’re much cheaper than they used to be.

    If Rollins can again command the earnings multiple that it used to have (around 45X), and if it can manage the earnings growth it used to have (12% to 14%), then this is a very inexpensive stock. Of course, that’s a lot of ifs. I’m going to keep a close eye on Rollins.

    That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

    – Eddy

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  • Broadridge Earnings 82 Cents per Share
    , February 1st, 2022 at 9:58 am

    This morning, Broadridge Financial Solutions (BR) reported fiscal Q1 earnings of 82 cents per share. That met expectations and it’s a 12% increase over last year. Recurring fee revenues grew by 19% to $798 million.

    But the best news is that Broadridge reiterated its full-year earnings growth range of 11% to 15%. That works out to a full-year earnings range of $6.28 to $6.51 per share.

    The company lowered its target operating margin from 19% to 18.5%, but it said that its recurring fee revenue should come in at the high end of its range of 12% to 15%. That’s not bad.

    The CEO said that it’s “well positioned to deliver on the higher end of our three-year growth objectives.”

  • Morning News: February 1, 2022
    , February 1st, 2022 at 7:12 am

    India Plans Record Borrowing to Fund Modi’s Growth Ambitions

    India Finally Warms to Crypto With Tax, Digital Currency

    Europe Is Losing Nuclear Power Just When It Really Needs Energy

    Threat of Hard-Hitting Russia Sanctions Leaves U.S. Companies Planning for All Scenarios

    States Are Complicating Corporate Pandemic Planning

    Fed Officials Make It Clear: This Time Is Different

    Germany Scuttles $5 Billion Chip Deal With Taiwan Firm Amid Tech Sovereignty Concerns

    Sony to Buy ‘Halo’ Creator Bungie in $3.6 Billion Deal

    AT&T to Spin Off WarnerMedia in $43 Billion Discovery Merger, Cuts Dividend

    Peacock Looks to Winter Olympics for Second Chance

    Tesla Agrees to Drop Self-Driving Feature that Runs Stop Signs

    UPS Delivers Rosy Outlook for 2022 After Record Earnings, Shares Soar

    Is Amazon Ready to Raise the Price of Prime Delivery? Wall Street Thinks So

    Domino’s to ‘Tip’ Customers $3 for Placing Pickup Orders As Labor Shortage Continues

    New York Times Buys Wordle

    Teen Who Demanded $50,000 From Elon Musk Is Now Targeting More Billionaire Jets

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  • Otis Beats for Q4 and Offers 2022 Guidance
    , January 31st, 2022 at 6:45 am

    This morning, Otis Worldwide (OTIS) said it made Q4 earnings of 72 cents per share. That’s up from 66 cents per share from one year ago. The consensus on Wall Street had been for earnings of 68 cents per share.

    Quarterly net sales were up 2.2% while organic sales rose by 2.8%. Adjusted operating profit margin was 14.6%, and New Equipment orders were up 7.3% in Q4.

    For the year, the elevator folks made $3.01 per share. That’s an increase of 19.4% over last year. Full year net sales increased 12.1% “driven by a 8.9% increase in organic sales and a 3.0% benefit from foreign exchange.”

    “Otis delivered a strong fourth quarter, capping an excellent year as we continued to execute on our long-term strategy and provide innovative solutions and services to our customers. Despite ongoing macro challenges in 2021, we achieved consistent and broad-based organic sales growth and margin expansion, grew our maintenance portfolio at the highest rate in over 10 years and gained share in New Equipment for the second consecutive year. Additionally, our continued robust cash flow generation enabled us to strategically deploy capital to create long-term value for all stakeholders,” said President and CEO Judy Marks. “We are confident this momentum will continue in 2022 and beyond, positioning us to deliver on our financial commitments and advance ESG priorities.”

    Now let’s turn to guidance. For all of 2022, Otis expects earnings to range between $3.20 and $3.30 per share. That’s an increase of 6% to 10% over last year. Wall Street had been expecting $3.29 per share.

    Some more details. Otis also expects free cash flow of $1.6 billion. The company sees full-year net sales of $14.4 to $14.7 billion. That’s up 1% to 3% over last year. Otis sees organic sales rising by 2.5% to 4.5%.

  • Morning News: January 31, 2022
    , January 31st, 2022 at 6:40 am

    China Is Changing Its Coal Use, and It Affects the Whole World

    Europe’s Economy Shows Resilience to a Surge in Coronavirus Infections

    Biden Economic Agenda on Hold as More Americans Hit Hardships

    Fed Nominee Has Focused His Research on Monetary Policy and Poverty

    Then and Now: How This Fed Liftoff Is Nothing Like That of 2015

    Fed’s Tightening Plan Upends Outlook for Treasury’s Bond Sales

    Inflation and Deficits Don’t Dim the Appeal of U.S. Bonds

    Stocks Rebound But Head for Worst January Since 2016

    An Army of Faceless Suits Is Taking Over the $4 Trillion Hedge Fund World

    How Cookie Banners Backfired

    How Facebook Is Morphing Into Meta

    Elliott and Vista Near Deal to Buy Citrix Systems

    Streamers Struggle to Keep Users Who Joined to Watch a Hit

    Global Gaming Company Entain Looks to Compete in Metaverse, Immersive Gambling

    The Rising Human Cost of Sports Betting

    Elon Musk Offered a Florida Teen $5,000 to Delete a Twitter Account Tracking His Jet. It Wasn’t Enough

    Be sure to follow me on Twitter.

  • Update on FICO
    , January 29th, 2022 at 4:31 pm

    I wanted to provide a brief update on FICO (FICO). In the newsletter, I mentioned that on Thursday, FICO reported fiscal Q1 earnings of $3.70 per share. That beat expectations of $3.36 per share.

    FICO also said that it expects full-year earnings of $14.12 per share which was below Wall Street’s forecast of $14.81 per share.

    Here comes the problem. I lowered my Buy Below price on FICO to $450 per share. On Friday, the shares opened at $426.46 and began a fantastic rally from there. I had no idea that FICO would rally like that.

    This is an old lesson that in any portfolio, you never know who the big winners will be.

    On Friday, FICO eventually closed at $493.12 per share. That was a gain of $70.13 per share or 16.58%. In other words, my $450 Buy Below was a wee bit off. I’ll probably adjust that upward soon.

  • Church & Dwight Earned 64 Cents per Share
    , January 28th, 2022 at 7:18 pm

    On Friday, Church & Dwight (CHD) reported Q4 earnings of 64 cents per share. That’s up 20.8% from a year ago. Wall Street had been expecting earnings of 60 cents per share.

    For the year, the company made $3.02 per share. That’s up 6.7% from a year ago.

    CEO Matthew Farrell said:

    Our brands once again experienced strong consumption in Q4 2021. In the U.S. we grew consumption in 11 of the 16 categories in which we compete. Five of our brands experienced double digit consumption growth including ARM & HAMMER® Scent Boosters, ARM & HAMMER® Clumping Litter, OXICLEAN® stain fighters, BATISTE® dry shampoo and ZICAM® zinc supplements. Consumption continues to outpace shipments as supply chain disruptions continue. This strong consumption would likely have been higher if not for the ongoing supply chain challenges. This demonstrates the strength of our brands as we gained share on 6 of the 13 power brands in a difficult supply environment. Global online sales grew 12.7% in 2021, and as a percentage of total sales has expanded to 15% for the full year.

    The market liked the report as shares of CHD rallied 4.40% to close at $103.